Health Law Hardly At Fault For Rising Premiums

Dan Thystrup, owner of a paddleboat manufacturing company in Indiana, says he was told it was the new health care regulation that helped prompt a doubling of his firm's premiums. Thystrup, who'd been providing health insurance for his workers for more than two decades, said he had to make the difficult decision to drop coverage for both his workers and himself.

The new health law only accounts for a small percentage of insurance premium increases.

The new health law only accounts for a small percentage of insurance premium increases. iStockphoto.com hide caption

itoggle caption iStockphoto.com

Thystrup's business isn't the only one where premium increases are being blamed on the new health law. Celinda Lake runs the Democratic polling firm Lake Research. She said her firm's premiums are going up 20 percent.

"My broker told me that it's because of health insurance reform," she says.

But is it really?

Absolutely not, says Jay Angoff, who heads the Office of Consumer Information and Insurance Oversight for the U.S. Department of Health and Human Services. "It would be inaccurate and silly to blame it on the new law," he says.

Misinformation

"To the extent that the insurance companies blame the new law for rate increases, they know better," Angoff says. "They've said themselves that the new law would only raise rates by between 1 and 2 percent."

And even those increases would pay for a number of new benefits.

"They get the assurance that companies will no longer be able to cancel their coverage when they get sick," he says. "They get the assurance that there are no lifetime limits. That is, they have the assurance that coverage will be there when they need it. Kids can stay on their parents' policies until they're 26. Kids with pre-existing conditions can get insurance."

In September, in fact, HHS Secretary Kathleen Sebelius wrote to the insurance industry warning companies about "falsely blaming premium increases for 2011 on the patient protections in the Affordable Care Act" and that "there will be zero tolerance for this type of misinformation and unjustified rate increases."

The Root Of The Increases

Robert Zirkelbach of the insurance industry trade group America's Health Insurance Plans concedes that, despite what some have claimed, the law isn't the major driver of premium increases for next year. "In fact, the evidence is very clear that the rise in medical costs is a key factor in driving up health insurance premiums," he says.

But, Zirkelbach says, in some cases, premiums could rise significantly because of new benefits the law requires.

"Many people already have the new benefits that are required in the law as part of their current benefit packages," he says. "So they're not going to see [nearly as much of] an impact as people who have chosen less comprehensive policies in exchange for a lower monthly premium."

On the other hand, Zirkelbach says, "for those people who have less comprehensive benefit packages today, they're going to see a much larger impact in their premium as a result of health care reform."

Sluggish Economy, Costly Care

Insurance industry consultant Robert Laszewski says there's still another reason premiums are rising so rapidly right now, particularly for individuals: the bad economy.

"What happens in a down economy is that people who are healthy have a tendency to drop their health insurance sooner, maybe [because] someone in the household has lost their job," he says. "But if you're sick, you're going to do everything you can — you'll take a second mortgage on the house if you have to — to pay your health insurance premiums because you think that maybe you're going to use the insurance."

That means the insurance risk pool is full of sicker people, and premiums go up faster. But Laszewski says even if the currently rising premiums can't be blamed directly on the new health law, its backers still have a very big problem: The law doesn't do enough to bring down the rising cost of health care.

"To me, the real issue here is there's not a lot of hope in the new health law that we're going to change this," he says.

HHS's Angoff says he's optimistic that provisions of the law will help slow health spending, including new rules that give states the ability to more closely scrutinize proposed premium increases. HHS also has a new website that will let consumers directly compare health insurance prices.

But not many other experts are convinced the law will do much to bring down rising health care costs.

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